SENIOR politicians today called for Government intervention to rescue a massive construction scheme that looked set to create hundreds of jobs in Tees Valley.

Stockton MPs Frank Cook and Dari Taylor are lobbying Prime Minister Gordon Brown and Business Secretary Lord Mandelson to help prevent the collapse of the SeaDragon project - a major scheme to make state-of-the-art giant drilling rigs at Haverton Hill shipyard.

SeaDragon Offshore, the company behind the scheme, had signed a contract with the Tees Alliance Group (TAG) to complete the work but is now understood to want the rigs to be made in Singapore instead.

The Cayman Islands-based firm said it was terminating its agreement with TAG - meaning the local supply chain could miss out on millions of pounds of worth of work.

But the head of TAG, David Eason, said there were no grounds for the contract to be broken and he was seeking legal advice to keep the work in the region.

The scheme is believed to have foundered on a financial wrangle between the two parties. SeaDragon, which has secured debt finance from Lloyds TSB, is understood to want to find a cheaper way of building the rigs.

Mr Cook, MP for Stockton North, criticised the bank, which is 43.4% owned by the taxpayer, saying its “unwillingness” to maintain financial backing for the project had put the contract at risk.

In a letter to Lord Mandelson and Mr Brown, he said: “I cannot overstate the degree of anger and concern within the area that a commercially viable project, which was seen as crucial to reinvigorating Teesside as a major centre for manufacturing, has apparently been brought to its knees by lack of support from a bank which is receiving huge amounts of public money.”

Mr Cook, who campaigned for years to re-open the Haverton Hill yard and bring the SeaDragon contract to the area, said “immediate Government intervention” was required to secure jobs for local people.

Stockton South MP Dari Taylor, whose constituency borders the shipyards, described the decision as “gut-wrenching” and has been in crisis talks with Lord Mandelson.

She said: “This is a very serious situation. It’s not one we anticipated.”

Jimmy Skivington, Tees Valley-based organiser for trade union GMB, branded the announcement “a massive blow” - but said the union would explore every avenue to salvage the project.

“It’s absolutely devastating news,” he said. “There are guys down there who’ve left other companies and other jobs with long-term security to work on this.

“I’m not trying to build anyone’s hopes up, but hopefully it’s not dead in the water,” he said.

Business and regeneration leaders reacted with disappointment to the news but backed Tees Valley’s capabilities in delivering large-scale manufacturing projects.

Neil Kenley, Tees Valley Regeneration’s strategic investment and marketing director, said: “If SeaDragon were to go elsewhere it would be a disappointment but there are still many, many positives on the horizon for the Tees Valley.

“We have a number of projects in the pipeline that will go on to create thousands of jobs and we have the skills and ability to attract those firms considering investment or expansion to look to the Tees Valley.”

Liz Mayes, assistant regional director of the Confederation of British Industry (CBI) North East, said it was “disappointing news” for the Tees Valley, given the region’s manufacturing strength and “capacity to deliver projects like this.”

Regional development agency One North East said it was seeking talks with Tees Alliance Group to clarify the situation.

Business development manager Ray Thompson said: “The SeaDragon project has already brought a significant jobs boost to the region with approximately 200 people currently working on the project, with the promise of significant further employment to complete the rigs.”

Understood to be the country’s biggest non-military fabrication project, the scheme had promised to bring lucrative opportunities for the local supply chain following the re-opening of the Haverton Hill yard last year - 29 years after it had closed down.

The cutting of the first blocks of steel were supposed to herald a bright new dawn for Tees Valley’s iconic manufacturing industry - until this latest setback.

Lloyds TSB was unavailable for comment.

Page 2: Fury over future of shipyard deal

Fury over future of shipyard deal

A FURIOUS row has erupted over the future of a project that was set to bring millions of pounds worth of investment to Tees Valley.

SeaDragon Offshore had signed a contract with the Tees Alliance Group (TAG) to have at least one state-of-the-art drilling rig built at the Haverton Hill shipyard near Billingham - bringing the promise of large-scale investment and job creation to the area.

Now contractors say SeaDragon is terminating the deal with the rig construction work now being completed in Singapore instead.

But head of TAG, David Eason, said there were no grounds for the contract to be broken and he was seeking legal advice to keep the work in the North-east.

He said: “This is an extremely difficult situation.

“SeaDragon is basing its attempt (to terminate the agreement) on the claim that we are in breach of our contract with them. This is untrue.”

Mr Eason said the decision could lead to redundancies within the group, which had the “capacity, capability and facilities” to carry out the work.

“We have, unfortunately and entirely due to the actions of SeaDragon, had to warn employees of potential redundancies,” he said.

“However, TAG is currently involved in negotiations to secure other, unrelated projects to take the business into the future.”

In a statement, SeaDragon said it had worked “extremely hard” over a number of months to explore “various alternative options” to keep the work in Tees Valley.

“This was an extremely difficult decision to make, but SDO leaves a legacy of $150m investment on Teesside and is hopeful that this will help to bring future projects to the area.”

The Cayman Islands-based company said failure to strike a deal with Mumbai-based Great Offshore - which last year submitted a formal offer to buy a 75% stake in the firm - was not a factor in the decision.

At the time of the negotiations with the Indian firm, SeaDragon was seeking fresh capital to extend the project because its debt of around £200m from Lloyds TSB was insufficient to cover the cost of building the rigs.

According to the company, the decision to end the TAG contract was based on “commercial reasons”.

Page 3: SeaDragon scheme utilises Tees engineering firms’ expertise

SeaDragon scheme utilises Tees engineering firms’ expertise

THE multi-million pound SeaDragon scheme has drawn on the expertise of some of Tees Valley’s leading engineering firms.

Cleveland Bridge and Mech-Tool Engineering in Darlington and Billingham-based McGill Services Ltd have all played key roles in what is understood to be the country’s biggest non-military fabrication project.

The hulls for the giant rigs are being made in Russia, but local firms were due to build the topsides here on Teesside.

Yesterday Cleveland Bridge, which is carrying out fabrication and development work on the semi-submersible rig, said there had been no change to its working arrangement with SeaDragon.

A spokesperson said: “Work is continuing on our part and will continue until we hear otherwise.”

Meanwhile Mech-Tool and McGill Services have been working on the development of the rig’s living quarters in a deal worth more than £14m to the latter.

Mech-Tool cut the first steel on its £3m contract to fit the oil rig shortly after the Haverton Hill yard was declared open for business again in March 2008.